HANDOUT 01/20/2009'lam(or-1 i tcut
INFORMATION
City a!
Elk -.--~
River
MEMORAPIDUM
~~ a~or and v~nc~~ ~~b~~r~
~~~E: anna~~y ~, ~0~9
SUBJECT: Quarterly Investment Repar~
~'~~]~~:
The ~uoe a~ this ~ep~~t ~s to ud~,te the iT c~u~c ~ ~e ~~s ~~' ~~e ~a~€ous
in~~~ts that the ~it~~ a..tai.n. '~~ ~e~~~t ~ ~ ~~'ecebe~ ~~, ~~aS.
B.~R~~:
The it ~u~C~ aC~Dpted ~~~ o~l~l~~ ~D~C~r on .~~ ?~, ~~9~ ~~. subsequent
~d~b.ati~n can ~b~uat 5, ?~~~. The ~alie~r enera~ll~t ~ollo~~rs ~.~ ~~~~n~n~nt .an.ce
~~'ee~ r~ac~d.on ~~.} ~.adel and die ~~~np~~t ~, tt~ Stat~t~.
The ~n~estent gals ~~~ ~ ~~~ ~~' ~u~ ~~~ e~ aye pass~~re ~ nature due to the a~~4~rable
v~t~~nt ~~~n~.tted nde~ State S~atut~~ ~"~~ ~~r has ~'QUx objectives ~~r ~n~et~n ~
o~de~ o~ ~pv,~tan~~. They ~~~ a~~r off' p~.ncia~, liquid~t~T, ~etuxn on ~ri~fiestment, and
~t~ the ~ub~e txust. This means ~~ aye ~~~u~d on nit ~r~i ~~ ~ ~~~a~
vest~net, haven su~cient fund ~n ~~and to meet on~~ ~pe~at~n cash ~eed~, etn ~
~.axket ~•ate ~~ ~etn, end ~~t pu~chasi speculative ~nvest~~ents.
State Statutes lit the lt~r's abl~at~t t~ i~,vst . r~a~r ~k~r t~~ae o£ lnvet.ents. The ltd
dae nit p~xch~se stocks ~~ mutual funds, T'he ~~ is enera~~~ l~.ted to ~`ederal and state
o~ ern~..e~t ~blla~~~s o~ agencies backed b~; theme, The i~ can invest In ha~:t~te~
ca~ne~cial peg ~hl~! gated}, e~ti~cate ~f ~ep~slt ~r rr~one~r n~ar~et accounts ~~th
~llate~~lati~n ~~' excess off` ~~I insurance arnaunt}, and the gated debt ~f ~r~.z~esc~ta
~` i y..r`
4+~iwA~~4
Thy Cif t~~ds to hold ~nvest~nents unto n~at~xit~t, ~v~uch means eve ~~ het tl~e ~at~ ~f
~~~ ~'~~ ~vhich eve ,vest ~ Funds. Crux real ~~ not to extend ~u~ maturities be~~~nd her
~rea~ unless ~~~ aye atc~~in gash ~~~ to a secic debt se~ice a~Tent.
INFORMATION
the i makes sure eve are su~.c~ent~~~ ~qu~.d bar continua~~r updat~n~ cur forecast vn ~~
anticipated cash 1~~~ needs ~~~ the ne:~t ~i~re year tie baron. 'ale also build i~ a reserve
balance incase of unexpected e~penc~tu~es, these funds are ~ainta~ned ~ n~~ne~~ n~~xket
accaunts laugh the ~~~ und~ ~ antipate the fact that eve ~~ have ~vo urge tai
settlements each dear, along ~~i~ t~~e re,arly scheduled debt service pa~rmnt that accur
each dear,
err the past cau~le of months there ~~as been increased ol.tilir tl~e bond n~arl~ets and
tia ~tield curare ~~a started to sho~~r signs ~~ an up~~rard~ sloping sl~ape ~~rhich ~~ meant ~ong-
term secuxit~es sl~gh~.~~ e~:ceed returns on sh~rt~tera instruments. ~ rna~F also indicate that
investors still. pre~'er liqu~d~t~t and ~~-i~ take a l~~ver ~rie~c~ fir shirt-t.x~ and secure
investments.
the i has to ~~eight ~.~e oppr~rtuni~r cost tc~ invest ~ longer term in~testments ~~ ride the
Meld curare and rein~`est at shorter n~atu.~ty .ter~~ais. the chart indicates the ~rields laave
decreased ~ ever~r t~.e hori~an the past a months. is current ~rieid curare praides
some additional Meld ~'or tine additianai market risk inherent ~n ianger term maturities ~~th
our tine ho~on. 'here~ore, eve ~. continue to monitr~r e ~Tield curare and, i~` r.~arl~et
dictates, start shifting n~.ore ~rorn shortyter~n~intenediate into ianger tern investrner~ts. e~
~a~~c~~ illus~r~t~an b~ln: ~xt:~/~~~~~~F.t~streas.~v~~~~c~~ f ~~met~e-~i~ar~ce f de~t~
man:~~~rn~~t~intcrestw~~te~~°ield~.~~~~ta~a~.~h.~
pities generall~r use a chart horan'benchrnark such as the ~~ da~f 'reasur~r Bill ~~~~~1~~0~
D.1 ~ ~1~~ ~~ some similar measure. fur current part~`ao ~~ield ~ rougl~r . ~ ~~1~~ ~~ is
calculated b~~ salting tl~e ~~ieid yes the current ~ralue £~~ each ~n~restn~ent and di~~id~n the
resuiti~.g at~c~unt her the to~~l portfolio ~ralue..~s in~~estment purchased . earlier gears
nature eve ~~ be able to replace them and iocl~ into some longer terms. interest rates, but
they l~~~r h~.ve ~~ be reinves~ed at leer interest rates as market conditions change. It i ~e~
t~~pical to lag the marl~et a i~.teret rates change. phis will lead to pore predictabilit~~ our
interest earnings.
,quidit~f leas been harder to Maintain for e past couple o~ ~~antl~s because ~~ the up~~vard
lopg ~ieid curare. This means ti~at short~ter~. investments aye recei~~.n a slighd.~r lesser
return than long~tern~ investments thin the it~r's investment tine hari.~on. s the cuxve
shi~'ts o~rer tl7e nest couple ~~ tnantl~s ~~ even becomes mare upward slop eve ~~
n~.anit~r e gates anal ingest accordinl~r. fur p~ar~r reserve account is our ~~ fund
INFORMATION
~vhi~~ ~ ~ one~r ~nark~~ ~cco~nt fat vaxi~u~ cities ~ao~ thc~r f~~ds star ~~ CU.~,~~nfi~~r ~~d~
,~G~l~ ~~ dai~~ ~~~dra~~r p.de~, `his c~na.~ares ~~r~ ~~ 1. ~ ~°lo ends .at aye
a~a~,b1 ~~her~ ~~ y~ ~~~-caab~e a~nci~s {b~~} invesen~ op~ian ~ ~~nsid~red,
the icy sve to maintain a ~ra~ diversif~~ad,~~ ~~~~~ia ~~ ~~di~ and ~~pn~e ~z~
#~1r ~tir1.Z44L~rLir
T~~ foll~~~ i ~ ~u~r~aryt ~~ sector di~t~b~.ti~n, a~enc~r dist~.~udon, and ~nte~est xate
disbudon as o~ ~? 13 ~ l ~~.
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